Judging Apple Sweatshop Charge

Steve Jobs' Think Different campaign celebrated labor leaders like Gandhi, who used strikes as a form of civil protest, and Ceasar Chavez, who organized poor, migrant farm workers. But a British newspaper at the weekend published a rather shocking report about the factories in China that make his company's iPods.

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A report in the middlebrow Mail on Sunday entitled "iPod City" features photos and first-hand accounts from inside factories operated by Foxconn, a company contracted by Apple to assemble millions of iPods by hand.

According to the report (paraphrased here by Macworld UK), Foxconn's giant Longhua plant employs 200,000 workers, who work 15-hour days but are paid just $50 a month — miserable even by China's standards. It claims they work and live in the plant, in dormitories housing 100 people, and outside visitors are forbidden.

The report says another plant that makes Apple's iPod shuffle in Suzhou, Shanghai, employs mostly women, because they are more trustworthy. Another factory is secured by Chinese police officers, the paper said.

Workers at these factories earn more — about $100 a month — but are not housed by the company. The paper says rent and living costs eat up about half the worker's salaries.

It should be no surprise that Chinese factory workers are low paid but the report makes conditions sound positively Dickensian.

The situation is too murky for a rush to judgment on Apple's ethics here, and it may well meet minimum global standards. But for a company that has staked its image on progressive politics, Apple has set itself up as a potential lightning rod on global labor standards. Sweatshops came back to bite Nike after its customers rose up in arms; and Apple can expect a similar grilling from its upscale Volvo-driving fans in the months ahead.

Tech companies' records in China are in the spotlight for a wide variety of human rights issues. Google and Yahoo have weathered a lot of criticism — quite rightly — for censoring search results and cooperating with the Chinese authorities cracking down on dissidents. I'm not nave enough to expect companies to behave morally like individuals, but I find Google's corporate mantra "Don't be evil" to be especially galling. They dropped that one pretty quick.

All of this should put Apple on notice that doing business in China in anything less than an exemplary fashion is a recipe for a PR disaster.

It's undisputed that most of Apple's products are made and assembled in China. In recent financial filings, Apple says most of its manufacturing is performed by third-party vendors in Taiwan, China, Japan, Korea and Singapore; and assembled in China.

"Final assembly of substantially all of the Company's portable products including MacBook Pro, iBooks and iPods is performed by third-party vendors in China," the report says.

Apple is just one of myriad companies using Chinese factories to make its products. And of course, it does so purely because of China's low wages and other costs.

The iPod is assembled by Inventec and Foxconn, two manufacturers headquartered in Taiwan that own factories in China and elsewhere. Foxconn is a trade name of Hon Hai Precision Industry, a $16 billion giant and one of the largest electronics manufacturers in the world, which makes everything from Playstations for Sony to iPods for Apple.

According to a BusinessWeekprofile, Hon Hai employs about 100,000 people in China. It's hard to imagine the staff at the giant Longhua plant swelling to more than 200,000 workers, which would make it bigger than the city of Spokane, Washington, no matter how many iPods Apple sells.

Nicholas Lardy, a senior fellow at the pro-globalization International Institute for Economics, said Hon Hai has an "excellent reputation." He says factories in China operated by big global companies like Hon Hai are very different from smaller, indigenous operations. International giants usually enforce the same work practices in China as they do in other parts of Asia, or Europe and United States, according to Lardy.

Lardy said he had no specific knowledge of Hon Hai's facilities, but plants he's visited in China run by competitors like Jabil Circuits could be located in the United States or Europe.

"Other companies' factories are pristine," he said. "They could be anywhere."

However, Dan Viederman, executive director of Verit, a non-profit social research firm, said that while Chinese factories in the high-tech sector often comply to international standards on issues like the handling of toxic substances, they fall short on labor practices.

Viederman said Chinese manufacturers are getting better at environmental issues thanks to tough laws in countries where the goods are sold, like the European Union's directive on eliminating toxins in electronics. But in other areas — especially labor law — they are lagging.

"We see endemically excessively long hours, health and safety violations, underpayment of wages or overtime premiums," he said. "Also, there's no labor unions."

China Labor Watch says one of the most serious labor issues in China is the inability of workers to organize.

"The root of abuse is the knowledge on the part of both governments and companies that, no matter how workers are treated or what they are paid, investment will continue to pour in and goods to pour out," the site says.

Christopher Foss, spokesman for Social Accountability International, a non-profit human-rights organization, said the technology industry is starting to get a reputation for poor overseas labor practices.

In the past, sweatshops were associated with certain industries like apparel, food and mineral extraction, but as technology requires more low-skill assemblers than highly-trained manufacturers, it's starting to get a bad rep, he said.

"There's a lot of menial tasks in sub-par positions," he said. "It used to be high tech was well trained and well paid, but it's the same race to the bottom. There are problems now emerging in the technology sector."

However, Foss said at least one of Hon Hai's facilities has been certified to the SAI's SA8000 labor standard, which is based on principles established by the International Labour Organization and the United Nations. "The facility has recently been found to be free of basic human rights violations based on ILO and U.N. norms," he said.

That may be so, but Apple needs to not only meet minimum standards, but set an example by exceeding them. It's the right thing to do of course, but it's also smart business–something Jobs should surely understand. For Apple's demographic — well-heeled urbanites — human rights and labor practices are, presumably, important matters. They buy fair-trade coffee, but iBooks and iPods are not an issue?

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